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Joe is a former financial advisor and media representative for American Express and Ameriprise. He was the “Money Man” at Detroit television WXYZ-TV, appearing twice weekly. He’s also appeared in Bride, Best Life, and Child magazines, the Los Angeles Times, Chicago Sun-Times, Detroit News and Baltimore Sun newspapers and numerous other media outlets.  Joe holds B.A Degrees from The Citadel and Michigan State University. 

Our Biggest Episode Ever! – 2 Guys and Your Money Episode #34

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Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

I couldn’t believe it either….last week we had Jean Chatzky, this week we go all-out political with an interview you’ll need to hear.. and after that? Just ANOTHER interview you won’t believe. Hope the rest of your Monday is as awesome as this stop will be…

As usual, more detailed show notes will appear during the day Monday.

 

Show Notes

 

<> Open

<> New Sponsor: Bud Light

<> President Barack Obama and House Speaker John Boehner (R)

<> Let’s Give Something Away!

<> PK: How To Insider Trade Without Getting Caught

<> Roundtable: The Rent’s Too Damned High! What We’re Gonna Do About It

<> Interview #2: Goldman Sachs Executives – Let’s Tone Down Profits So Everyone Wins

<> End Show

Movies: OG – Hardbodies II (Thumb WAY up); Joe – Jaws 3D (Excellent Plot)

 

 

If you comment, please tell us whether you like the President Obama interview, Goldman Sachs interview, or  Pk’s advice….

 

Money in two countries? Here Are Your Options

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If you have savings abroad, where should you save?

 

When I was a financial advisor I worked with several international families. Generally, they all had the same concern: which currency should I save money toward?

There are two ways to look at this problem. First, you could bemoan the fact that you have to guess which currency is the right one to save toward. There’s significant upside and also significant downside. If you save into the wrong currency, you could find yourself with much less money than if you picked correctly.

The second (and in my view….better) way, is to avoid the decision altogether and save into BOTH currencies. This is enticing for a number of reasons:

1)   You aren’t placing a bet, therefore avoiding the “which is better” issue.

2)   You can now focus on withdrawals, rather than savings. If currency fluctuation continues (and it will), you’re in the enviable spot of pulling dollars from the currency with the highest return at the time.

3)   You have flexibility built into your plans, especially if you wish to travel abroad.

Of course, there are also risks to think about. While I like the “not choosing” strategy, there are a couple of reasons to be wary:

1)   You may have tax returns in multiple countries. If you’ll be required to file tax returns for the countries where you have savings, you may find that the cost and time associated with this plan isn’t worth the effort. That’s why I only recommended saving internationally if you were going to accumulate

2)   You’ll have to facilitate international money transfers. By understanding the process, fees, and (maybe most importantly) time this process will take,, you’ll have realistic expectations. By partnering with a good international bank, you can quickly learn the ropes of having money in multiple countries.

3)   You’ll have to stay on top of different “dashboards.” As I’ve mentioned in previous pieces, I prefer diversification but with simple tools to examine so that I can quickly make decisions. Having money internationally can compound the task of setting up monitoring systems if you aren’t careful.

As you can see, I think the rewards clearly outweigh the risks when it comes to international investments. If you have enough money abroad to make the process worthwhile, understand taxation of international assets, and have good banking partners, the process can be smooth and rewarding.

Photo: Rome Cabs

An Interview with Financial Guru Jean Chatzky! 2 Guys & Your Money Episode 33

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Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

I know what you’re asking yourself, and I have both answers:

1) I have no idea why she agreed to be interviewed on our show, but I’m grateful.

2) Yes, she was charming, fun and great to talk to on the podcast. You’ll hear nearly the entire conversation she & I had together.

WE HAVE a fantastic show for you about money management and good teachers. First, Jean Chatzky (Today Show money editor, one of the original founders of Smart Money magazine, Money magazine writer and more) discusses her financial background, money struggles, and her upcoming Money School. Dominique Brown and PK share lessons learned from great teachers. Joe & OG share strategies of great teachers (and salespeople).

As always, show notes will materialize throughout the day Monday.

Show Notes

Jean Chatzky – Today Show Money Editor

<24:55> Discussion with Dominique Brown, Your Finances Simplified: Best Professor

<31:25> PK’s Fractional Sense: Best Teacher

Let’s Give Something Away

<40:12> Joe & OG – How great teachers (and great salespeople) help you learn – neuro-linguistic programming

<> End show & films: OG – Ted (thumb sideways) and 7 Psychopaths (thumb sideways)
Joe – Salmon Fishing in the Yemen (thumb up)

Any films we should review?

To win the big prize for the contest in the part of the show that doesn’t exist, send your entry to joe at the free financial advisor (dot) com.

On Celebrating Wins, Arkansas, Carnegie Mellon and Budgets-to-Nowhere

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This post was supposed to be yesterday, but we’d just returned from Fayetteville, Arkansas, full of good feeling, late and tired. Rather than run the piece I’d planned, let’s hit the pause button.

 

My daughter is going to run track for the Arkansas Razorbacks. It’s a top notch track program (four Olympians) with a wonderful coach. She’ll be in the honor’s college at the school. Three weeks ago we thought her running career might be over. Then she ran a 2:18 half mile. We called the Arkansas coach. Surprisingly, he agreed to meet with us. The entire time we sat in his office I was in shock. My daughter might be on a big-time track team. Now it’s real. She’s on her way to run in the SEC.

We found a restaurant called Hugo’s to celebrate when my son called from home (he had a major project due and couldn’t miss school for the trip). He’d received early word that he’s “probably” been accepted at Carnegie Mellon. The real process isn’t official until April 1, so we don’t know for sure, but someone we know told Nick he’s in. This person would definitely be in “the know.” At this point I’d be surprised if he wasn’t accepted.

It took lots of long workouts and study sessions for these two kids, so it’s a well deserved high five. Both of these “wins” mean more long workouts and studying  on the horizon. My daughter will have to train harder and run faster than she ever has previously. My son will be in one of the more rigorous programs in the country (assuming he accepts…which isn’t a certainty. He’s applied to NYU and has been accepted into the engineering program at the University of Texas). No matter. All of them are top notch schools with some brutal requirements.

But now the doors are open. It’s time for them to pause only briefly before they walk through. But we’re definitely in pause mode. Rest. Celebrate.

 

What is Money?

 

What is money? What’s it all about? Does it beat these moments? Does it create these moments? Is it just fuel? If it’s fuel, why the hell don’t we work hard to accumulate fuel for these big moments? Why do we waste them on irrelevant moments, like the time you’re at the supermarket and just “decide” to buy the more expensive cereal?

I think money exists for these times. I don’t care about spending a shitload of money on college for two of the people in my life that mean the most to me. Period. It’s why I saved. It’s what I sweated for. If I’m good for retirement (and I am) the one gift I can give my kids is education. I don’t want to rant on education here….this is about celebrating. I want to make sure we take a little pause.

Sometimes we work so hard to achieve so much that we just skip by these times. We cut the grocery bill and dinners out so often that when these big moments come we forget why we cut in the first place. We don’t mark them before moving on, or we make the event so “frugal” that it ruins the fun. Clearly, it’s important to save money, but these times….these captured dreams shouldn’t be trivialized. Every day is a new chance to create a new “glory day” so we shouldn’t sit in park forever….but I’m happy we celebrated. We took a ton of pictures. My kids are in a good place today, back in “move forward” gear. I think they’re in an even better place because we stopped to survey the mountain we’ve climbed so far.

Photo: twicepix

Squeezing More From Your Vacation – Two Guys and Your Money #032

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Listen to shows on your smartphone! Try the Stitcher app here.

Is it nearly vacation season? We’ve got you covered. Nola Beard from New Take Travel joins us in the basement to talk house swapping! She’s traveled to exotic locations around the world by swapping houses 25 times, and has saved over $10,000 in hotel costs.

OG & Joe discuss what advisors are worrying about in 2013, Len and Joe talk about other ways to save on your vacation (Dominique Brown chimes in remotely), PK finishes his series on credit, and of course…as always….we give something away.

Show Notes, per usual, will appear here later. I’m on another college trip with the twins!

 

Howz’ about some Show Notes?

 

<> Open

<> Save 15% with H&R Block at home tax preparation

<5:43> What Financial Advisors Worry About in 2013

<18:55> Nola Beard from New Take Travel: House Swapping

From Nola’s blog: Her First (Amazing!) Home Trade (we discuss this one with the key exchange in Dubai on the show)

Follow Nola on Twitter: @newtaketravel

<37:34> Len Penzo: saving money on his trip to Hawaii

From Len’s Blog: Extended Warranties: 4 Essential Questions to Ask Before You Commit

<51:28> Dominique Brown: saving money on his trip to Europe

From Dom’s Blog: A Landlord’s Guide to Understanding Government Subsidized Housing in 5 Minutes: Section 8

<54:08> PK from DQYDJ.net: Part III: protecting your credit

From PK’s Blog: When Was the All-Time High in the S&P 500?

<59:35> Let’s Give Something Away – 5 listeners will win Laura Vanderkam ebooks!

Enter Our Giveaway Here For a Chance to Be One of Five Winners!

<1:02.54> End show

OG – no films

Joe – Book Review – Restaurant Man

Average Joe’s Friday Read-along: 3 Times the Charm Edition

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How many times in a row do you have to be right before people catch on? In our little year-in-a-half existence, we’ve only tried to make a few points:

–       Stop making bone-headed financial moves

–       Good advisors often win NOT because they make brilliant decisions but because they stop clients from making moves that wreck their financial plan

–       And, oh yeah, it might be a good idea to have a strategy in writing

We do all that and talk about avoiding the hotel minibar…..

While you may use the word “genius” (and we won’t stop you), we’ll stick with “prudent.” Sigh. It’s tough.

We’re not in the business of calling the stock market, and as some of our readers have mentioned (and we totally agree), you shouldn’t be, either. However, someone who’s a good advisor can see some obvious trends marching down the road. We’ve only made three calls here, and in our view, they weren’t tough:

–       We recommended people avoid the Facebook and Zynga IPOs. Zynga, after opening just over $9 per share, now is trading at $3.72 as I write this. Facebook, while better, also isn’t good news. It opened over $29 per share and is trading at $27.04.

–       On the April 9th issue of our podcast, we told listeners to avoid Apple stock. It was trading at $636.23. Today? $432.50. Follow our advice and pare back? You are welcome….

–       And finally, eight days ago, on March 7th, we said, that while you should put defensive measures in place, we thought there was a good chance the market could still run up and you shouldn’t try to time it. We got pushback on this one, especially. The internet worry that the market was too high ended up being more financial pornography, brought on by the media hype of “sky is falling!” (I won’t call out specifically the three guys who told us they were worried and taking profits….). On March 8th, SPY (the S&P 500 ETF) traded at $155.44. Today it’s opening at $156.73.

So, because we don’t plan to call the market, you STILL won’t get a ton of moves from us in that area. You’re smart enough to know that you should start with your goal, find your perfect diversification, and finally, stay invested and rebalance. However, ahem,  not to brag or anything….but we’re three for three.

 

So Now It’s Time To Mention 8 Blogs

 

Budget and the Beach – Tonya experiences the real fear of running out of money. She worries that it’s making her a penny pincher. I love the fact that she’s really in tune with how tenuous any financial situation can be.

Young Adult Money – DC talks spring cleaning. This gave me the fantastic idea that we need to talk about this topic on our podcast. Thanks for the inspiration, DC, but no thanks for reminding me that my garage needs serious attention….yuck.

Debt Roundup – Don’t be a hater! I know this post is three weeks old (ancient by blog standards), but I’ve got to point to one of my favorite articles ever on Grayson’s site: his rant about passive income. It was good to see another person call out the passive income lie. There is no cake.

Dough Roller – I like the idea of visual budgeting (so you can watch outflows more carefully). This article on the best calendar-based financial management tools shows three good candidates for me to play with.

Careful Cents – Speaking of apps, Carrie Smith tackles one of her favorite topics: tax organizing and filing apps.

Wise Dollar – I try not to mention the same blog two read-alongs in a row, but this post was great. Jose lost his job but details point by point his strategy while transitioning and looking for new work.

Reach Financial Independence – Pauline has a fantastic travel series. I grabbed her idea to use AirBnB for travel in the UK and morphed it into my summer trip to Northern Michigan. Her latest describes ways to travel France on a budget.

Club Thrifty – Holly is at war with the naysayers questioning her commitment to pay off her mortgage.

So many more blogs to mention, but I’m sticking to my rule of 8. It actually makes picking hard, but more fun deciding than just crankin’ out a laundry list….

Hello….My Name Is….

 

Hello to Johnny Moneyseed….a fantastic moniker and cool ass logo. Check out his post on traveling for less.

And hey-o to Alice at Hurricanes, Panties and Dollars. While I like Johnny’s logo, Alice’s got my attention more quickly, somehow…. Check out how she runs a carnival.

We’re Very Popular and Humble, Too….

 

Thanks to a ton of people for shining lights on our work this week.

Most notably, Robert at The College Investor was kick-ass enough to place our site on his list of the 19 Best Investment Blogs You Can Learn From. OG & I were happily surprised when we saw our name there.

Jen at the Happy Homeowner featured us in her Friday Link Love post today. Thanks for pointing to our How I Learned to Avoid Bone Headed Financial Moves post.

Laurie at The Frugal Farmer was kind enough to add us to her On The Town list of good reads.Thanks, Laurie for placing Rethink Your To-Do List on your own list!

Adam at Money Bulldog was kind enough to place our post 5 Great Stock Buying Tips to Practice Today on his weekend reading list.

And finally, Todd & John at Fearless Men (one of our all-time favorite sites for men) had the good sense to point to our Two Guys & Your Money podcast episode Makin’ Mo’ Money in their Weekly Roundup.

101 Ways to Make Extra Money In Your Spare Time – A Review

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Wondering how to make a few extra dollars? We read Jackie Beck’s new book to dig for moolah.

Yesterday Jackie Beck appeared on our podcast to discuss some of the ideas from her book 101 Ways to Make Extra Money in Your Spare Time. For those of you that don’t listen to podcasts, I thought I’d review the book here. My overall feeling: this is well worth the investment in time and money if you’re in the book’s target group.

Let’s start out with what this book isn’t. If you’re a person who’s confident that you’re doing everything it takes to make money, this book isn’t for you. Of course, the title gives this away, right? It also isn’t an in depth look at any of the 101 ways to make money, although Jackie includes tons of links in the e-book to many, many outlets for readers to begin gathering more information.  As a sometimes-reader of magazines like Real Simple, I’m often disappointed when good tips seem to be skewed toward one gender or another (in the case  of Real Simple, it’s women….which is why I don’t read the magazine often). 101 Ways to Make Money includes ideas for men and women, and of varying skill level. Simply put, there’s a little something for everyone.

 

Who Should Read 101 Ways To Make Extra Money In Your Spare Time?

 

Jackie mentioned online that her early readers seem to be stay-at-home moms. While I stated that this book does a great job of remaining gender neutral, it’s ideal for a stay-at-home mom or anyone looking to earn a few extra dollars on the side. It’s also great for that person who works a 9-5 job and is hunting for something else to bring in a few (or many) extra dollars. From raking leaves (obvious and easy) to setting up an Etsy shop and selling crafts (more pointed and needing a little skill), there are lots of tasks that can easily fit into a weekend or after work schedule.

 

The Capital Problem

 

In many cases, it takes money to make money, and that’s the case with some of these suggestions. Don’t think that you’re going to get 101 pairs of ruby slippers you tap together three times to fill your greedy little paws with cash. There will be work, and in many cases, you might need a little moolah to fund your new business venture.

 

Readability

 

Jackie, who writes at the MoneyCrush blog, among other places, is a seasoned writer, and it shows. Her style is easy and straightforward. While I breezed through this book, it wasn’t because it was void of information. In fact, Jackie’s style makes it simple to grasp some fairly complicated ways to make money as if it were easy.

 

Why Pay For A Book of Ideas?

 

When I first heard about this book, I thought, “why the hell would I pay money for a book of ideas, when there are so many resources on the internet?” Here’s exactly why: for me, time is valuable and the cost of having a consolidated list that points you toward deeper text on any of the ideas presented is invaluable. Do you want to spend your time figuring out how to make money or do you want to find a way quickly and spend your time working the idea? If you’re like me, your time is valuable and you’re hoping to just get on with it. Jackie’s book, priced at $4.99, is an ultra-low cost way to cut to the chase scene in your money-making pursuit.

 

What Don’t I Like About the Book?

 

If I had to pick something that could have been improved, it is how little  these ideas are explored. There’s no discussion of the capital outlay it might take to be successful in each business or the amount of money each one could reasonably bring in. Of course, I understand that this isn’t the point of the book and I’m nit-picking. I could easily see Jackie digging into some of these ideas to help readers gain a leg up on marketing, competition and creative ways to stand out from the crowd of other people doing these same tasks, if she chose to expand the book in the future.

 

Final Analysis:

 

For people looking to make a few easy dollars or to dip their toe into entrepreneurship, 101 Ways to Make Extra Money In Your Spare Time has the ideas you need to help you create a spark. If you don’t ask it for details, you’re going to be a happy reader, and at less than $5, it’s easy to justify making this investment to more quickly focus on the right income earning path for you.

Interested in purchasing the book? We liked it enough that we joined Jackie Beck’s affiliate program. Click the link here or in the article to head to Jackie’s order page if you have questions, want more info, or would like to purchase a copy.

Makin’ Mo’ Money – Two Guys and Your Money Episode 31

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Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

Cha-Ching! Thinking about ways to earn a little extra jingle? This is the episode for you. Jackie Beck from MoneyCrush joins us to talk about 101 Ways to Make Extra Money in Your Spare Time. Our bloggers from around the country discuss their best side-income ventures AND when it doesn’t make sense to focus on side ventures. OG & I talk about the role of exercise in earning more money and we give away the Digipiggybank from February’s contest. Will Lance finally win?

As always, show notes will fill in throughout the day Monday.

Show Notes

<> Open

<> Exercise and Money

<> PK: part 2 – Credit

<> Jackie Beck – link to the book: 101 Ways to Make Extra Money in Your Spare Time

Link to Jackie’s MoneyCrush blog

<> Shortwave: Good side hustles & when it doesn’t make sense to side hustle

From Len Penzo’s Blog: How a Broken Washing Machine Fixed My Finances

From Dominique Brown’s Blog: We Have Over $400k In Debt and I Love It

From Carrie Smith’s Blog: Are You Engaging Your Community of Customers?

Interested in Carrie’s Google Hangout Thursday, March 14? Here’s the link to learn more: Taxes for Freelancers and Small Business Owners.

<> Let’s Give Something Away

How about winning a book by time management writer Laura Vanderkam?

Enter Our Giveaway Here For a Chance to Be One of Five Winners!

<> End Show

Films: Joe – The Quartet (thumb down)

 

 

When I Was a New Financial Advisor

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when-i-was-a-new-financial-advisor
Every once in awhile, we like to take a break from the six areas of financial planning and give you a look into the life of a financial advisor. Here’s another story from my early years in the biz. Well….my earliest days….

I was lucky.  I’d been warned about the hours.

The time away from my young family was a bitch, even in my last years as an advisor and sadly, many of those years are a blur (for those reading my stuff for the first time, I worked 16 years as an advisor for nearly 200 families at a time, and managed about $60M in-house, plus helped people w/ their outside portfolios of over $110M more). I spent so much time with my head buried on the task at hand that much of the “now” passed me by.

It went smoothly for me. The friend who’d referred me set me up with his boss and walked me through the entire hiring process. As a courtesy, he set up a dinner with the firm’s two top area managers at one of the nicest restaurants in town. I was sure it was to dazzle Cheryl and I.

The district manager, Jeff, was blunt that dazzling ME wasn’t the point.

“This meeting isn’t for Joe, because he’s going to be with me and we’ll take care of teaching him the ropes. This meeting is for Cheryl.”

“Oh?” she asked, wondering exactly where this was going.

“I want to answer your questions. This job is going to absolutely suck…and there’s no guarantee Joe will succeed. He’s going to be gone from home a ton. You should just kiss his ass goodbye for the next two years. When he is home, he won’t really be there mentally. Are you ready to be alone that long without him?”

Cheryl seemed like she’d been hit with a brick. We hadn’t been married six months. “Yeah, if that’s what he wants.”

“…and,” Jeff continued. “He’s going to work long weekends and may have to travel. Sometimes it’ll seem like he’s doing glamorous things, like golfing or taking clients to nice dinners at places like this one. Sometimes that makes spouses jealous. It isn’t as glamorous as it sounds. Frankly, he really won’t enjoy it like he should because it’ll be all about business…and that business is just money.”

What a sales pitch, huh? At the time I thought he was exaggerating for effect, but he wasn’t. I still believe that dinner is why I lasted as long as I did. To this day I still believe that being completely blunt when something is going to suck is the best course of action. I was the same with my clients. No sense mincing the truth. People perform better under pressure when they know just how hot the fire is going to be.

He turned to me. “You ready to completely launch at this? You can’t be half pregnant.”

“Sure,” I said. I was excited.

I Got Lucky: New Financial Advisor With a Clue

Years later, I found out that my introduction to the financial advising business wasn’t anywhere close to the standard practice. I still can’t figure out why it isn’t. Over the years I dealt with young advisors who were coping with working late into Saturday afternoon while their young spouses, girl/boyfriends, and families were out enjoying the weekend. It turned out, most of them had been told a pack of lies:

–       This is a job where you can come and go as you wish.

While this is true for successful advisors, that’s because they were already bringing home the bacon. The management team watched new advisors like a hawk to make sure they were internalizing the practices it would take to be successful.

Everyone resented being watched over, but I get that part. Like those movies where you watch guys turn into werewolves, it takes time to morph into the mentality of a self employed business person. I felt especially bad for the kids just out of college who’d had a few part time cushy jobs. They had no clue what hit them. Within a few months, I got it. If I was leaving the office for any reason, you can bet that it was because I was meeting a client, a contact, or had some important money making task on the line.

–       We don’t cold call.

Luckily, I started when we COULD cold call and DID cold call. I know. I hated making cold calls as much as you hate receiving them. But, it was better than what later people had to do. They’d participate in “fishbowls.” In this marketing device, you leave a fishbowl at the counter in popular restaurants around the area, offering a free meal for you and your friends if you place your card in the bowl and it’s pulled out as a lucky winner.

Guess what happened? Every single person was a lucky winner. The meal was free, but it was shared with the advisor, who would talk shop the entire meal. Sound like less fun than a 10 minute call? It was SO much more painful for all involved.

Another trick was the “friends and family” seminar. This was even more disgusting. The advisor would give a financial planning seminar for friends and family, to “get feedback about the best ways to find new clients.” Yeah….it wasn’t about finding new clients at all, except the people in that room. By the end, family members realized that it was a sales pitch aimed squarely at getting them to sign on the dotted line.

Family members were nearly always my worst clients. They knew me before I was an advisor (shit, some knew me when I was in diapers!). They didn’t value my advice. They were just nice enough to help Joe succeed in his new venture. When it came time for real strategies that worked (refinancing, paying down debt, serious budget changes…God forbid if they were underinsured and we had to talk insurance…), many balked. They were hoping they could just buy a couple mutual funds from Joe and everyone would walk away feeling happy.

–       You can kind of dip your toe and see how you like being an advisor.

Several young advisors were told this. I still laugh at people I meet who are “part time” advisors. To be blunt, there’s no way to be great at financial planning and be part time, UNLESS you’ve been practicing many years and already have systems built to deal with all the client issues that arise. There’s just far too much to do. If you’re hiring an advisor, do you want someone who lives it all day or someone with just enough time to meet with a few people you don’t know and sell them some stuff? It sounds good, but like “passive income” and other “something for nothing” schemes, if it sounds too good to be true, guess what?

It still is.

For more on financial advisors and how to pick the right one for you check out these great articles.

What is the Role of a Financial Advisor?
Afraid To Meet With a Financial Advisor? Here’s How the First Meeting Goes
Hiring a Financial Advisor: Clues from the Receptionist

Photo Credit: vmiramontes.

How I Learned to Avoid Bone-Headed Financial Moves

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Live and Invest in the Now, Not in the I Hope or I Wish.

A good friend told me last week she wanted to buy some Apple stock.

“Why?” I asked, sounding a little more shocked than a good friend should in casual conversation.

Luckily, she didn’t notice. “Well, it’s low now. Don’t you think Apple makes good products? Shouldn’t we buy what we know?”

“Sure,” I said, hoping now to avoid the issue. Why do I say silly things like “Why?” when I don’t really want to hear the answer?

 

Invest in the Now.

 

I love the old line that goes something like, “Deal with reality the way it is, not the way you wish it were.” Investments don’t perform based on what we hope. If they did, Sirius/XM Radio would be in every damned car by now and the stock would trade at $150/share (I can dream). As for my friend’s question…sure I like Apple products. I own so many of them I have to write quickly because I’m sure Tim Cook is calling with a personal “Thank you” any minute. But Apple isn’t the same company they used to be. They seem focused on recovering rather than creating glory. I don’t think Apple’s headed anywhere good (my personal opinion…not a stock tip).

Back in the late 1990s I was heatedly debating the rapid increase in obesity in the United States with another financial planner named Julie. I adamantly pointed to all the infomercials about workout equipment and vehemently proclaimed that this was where investing was headed in the future. In short, people were going to see the light and get fit. We should invest in sporting goods companies.

She laughed. “Workout equipment. You’re so Pollyanna, Joe. I’ll just go with diabetes drugs.” Guess who won? Julie’s diabetes drugs are in more homes than ever, while the “Stepper” is an afterthought.

Julie invested in the Now. I was investing in the I Hope.

 

How to Invest in the Now.

 

I needed to get it through my thick skull that you can’t predict the future. You can’t expect people to change. You can’t know where the market is headed tomorrow. Sure, you can listen to as many points of view as possible, but in the end, investing is still a bet.

Is that a scary thought….that the market could just crap out tomorrow? It should be. I don’t think people get nearly as afraid of investments as they should be, given the daily level of risk in the markets.

Here are five mantras I tell myself that help me deal with risk in the market and save me from making bone-headed financial moves.

 

5 Reminders to Help You Invest in the Now

 

1)   Investment prices sink for a reason

When a stock/real estate/commodity price is down, there’s a reason it’s low. It’s not a “buying opportunity” that the universe created for your get-rich-quick-scheme. Dig deeper. Why is this real estate low? Is it market conditions? What’s creating the problem? Is it a plant closing in the area? Ask questions.

 

2)   Our brains are too small to understand all the reasons a market moves

We can’t possibly know the reason a stock/real estate/commodity rises and falls, no matter how much homework we do. I don’t mention this to negate what I said above in point #1, but to accentuate it. Complete as much homework as possible, so you know as much information as possible before trading. However, realize that sometimes there is still going to be a reason you won’t understand.

Maybe a huge investor in Taiwan decides to buy $5M of your favorite company today because it’s his birthday. Did you know that was coming? What if a big Australian investor needs liquidity and sells $10M of your favorite stock to purchase a different company locally. Could you predict this?

Whenever you trade, there are going to be reasons that fluctuations occur beyond your comprehension and control.

 

3)   We don’t know what “low” means

Saying an investment price is “low” implies that it will recover. How the hell would I ever be able to predict the future? If the price of a piece of real estate drops from $500k to $400k, how do I know it won’t go to $300k? The simple answer: I don’t.

The second I stopped acting like I had a clue where the market was going the following day was the day my investment results began to climb more quickly. I put more defensive measures in place to control my downside and became more attuned to seeking out as much information about a position as possible before I bought.

Once I knew that I didn’t know what “low” was, the harder I searched to find reasons an investment would decline in value. When it did decline, I knew how to respond much more quickly than I had when I’d guess the market direction. By not guessing, I became open to more outcomes.

 

4)   Read about the future, but realize that news changes everything

News is the destroyer of plans. Once news strikes, forget all of your plans. That doesn’t mean it isn’t important to plan.

It’s important then, to ask yourself, what news could occur that would affect this stock/real estate/commodity. Start with the economy. What would affect the price? Then work down. In this industry what could happen? What internal drivers of this company could affect my investment?

See how I began asking questions? Many of these questions I would have never asked in the days that I thought, “Apple stock is low right now.”

 

5)   Set a strategy to sell the moment you buy

Hopefully now you have (as I did), a better feeling for just how risky any investment can be. Once I know many of the risks (and have a better feeling for threats beyond my comprehension), I can put defensive measures in place to make sure I don’t get my ass kicked.

Investing is often as much about avoiding huge losses as it is about gathering big wins. Think about banks. What makes many banks successful isn’t that they score big on the wins. It’s that they make at least a little money on every deal. Think of all the ways banks protect their downside. Wouldn’t it be great to be in their shoes?

 

Start acting like the bank by practicing these mantras to experience better investment success.

Photo: kenteegardin

What are your mantras and reminders?